13 May Van Leasing Advice For Small Businesses
Today, most small and medium-sized companies (SMEs) choose to lease equipment and vehicle rather than making purchases or using traditional financing options. Typically, van leasing is always a cost-effective and hassle-free way to acquire vehicles for business purposes. Leasing enables you to choose the best terms of vehicle possession and the number of miles the leased vehicle should be driven. Depending on the flexibility and how attractive the lease agreement is, you can lease as many vehicles as possible to meet your needs.
Every SME considers a van a critical asset. It is used to facilitate trade, rather than a means to move from and to the workplace. The costs associated with establishing a business could as well leave you struggling to purchase a new vehicle. In such a case, van leasing is the best option. This article will help you understand the possible options of a lease that can meet your expectations and needs.
How Your Business will benefit from Van Leasing
Van leasing contracts last between 2 and 4 years and the leased vehicle are usually brand-new. This means that SMEs can be able to access brand new business vans without any complications to operate their businesses at affordable costs. A great perk of leasing a van is that it is always hassle-free and cost-effective compared to purchasing a car since you can incorporate benefits like service and maintenance costs into the monthly rental charges.
Accompanied by affordability, van lease gives small businesses a prestigious look. With a lease, you are able to have control over the vehicle image that your employees present. If the company, for instance, is committed to the environment, having an electric vehicle would promote the image of your brand. Also, long gone are the days when businesses have to consider monotonous fleet. Today, you can mix different vehicles for your business, including varying models and makes.
Choose the Type of Leasing that Fits Your Business
When it comes to vehicle leasing to any business, you can choose either an open-end lease or a closed-end lease. Commonly preferred by many business owners, a closed-end lease is a standard lease in which the finance company assumes the depreciation risks by setting the leasing period, which is usually between 12 and 48 months, and the annual terms of mileage. If you, as the lessee, exceeds the permissible miles, you would be charged for excessive mileage, which may range between $.10 and $.15 for every additional mile. At the end of the lease, you will have the option of returning the vehicle to the owner or purchase it at the residual value. Although this type of lease is accommodative to most businesses, it may not serve those that drive significantly.
Open-end leases, on the other hand, are very common for commercial uses since businesses are allowed to assume the depreciation risk. Depending on the needs of your business, you can set more flexible terms, including open-ended mileage restrictions. After the open-end lease contract ends, you can choose to either purchase the van at a residual value or pay for the depreciation value.
What to Do Before Applying for a Van Lease
For most small startup businesses, obtaining a credit line for the lease can be challenging, particularly because of the lack of trading history for the new business. Finance corporations will be looking at affordability and risk when they review the credit application. As such, you will need to prepare a few things before beginning the application process. One of those includes having the right documentation at the time of the lease application to improve the chances of approval. Other criteria may include:
- Proof of financial cash flow such as management accounts and invoices.
- Opening balance sheet for the startup.
- A personal director’s guarantee in case of a limited company.
- The leasing party may need a larger initial rental of up to 10 times monthly rentals.
- You may be required to offer different payment profile to the one you need.
- The value of the car may be restricted by the leasing company to a limit of $25,000.
- You may need a business plan.
- Bank statements for the last 3 months.
- Previous industry experience or trading history.
- Proof of address and identity of the company’s directors.
What Happens with Early Contract Termination
Keep in mind that you may be penalized for terminating your lease agreement earlier than indicated in the contract. So you need to be sure that you can afford the monthly charges associated with the contract until it expires. Since most small businesses fear future uncertainties, it is vital to ensure that you can comfortably afford the car you are leasing. Apart from this, one must ensure that the leased van is returned to the company in the right condition stipulated in the contract. Any reconditioning needed or damage that is not considered fair tear or wears will be billed to you, including any extra mileages that exceed the previously agreed contracted mileage.
Think of Your Leasing Budget
As a small business, it is essential to mind the type of venture you invest in and the associated cost. Several additional costs accompany lease application, including company car tax, potential excess mileage charges, comprehensive insurance, maintenance, servicing, and tires costs, and potential costs of fair wear and tear.
It is also crucial to be sure of the period at which you will use the van. It is recommended that small businesses or startups go for an affordable lease for a short-term period as opposed to a very expensive lease with a longer duration. This way, you will be in operation for a long period at a cheaper cost.
Do Thorough Research before Proceeding
If you are part of the small business community, you need to do thorough research to educate yourself on how exactly van leasing operates, the associated benefits and challenges, and the available leasing options. If you are not sure of leasing application processes, consider consulting an expert in this area to be sure of what your business needs and avoid any complications.